U.S. approves deal that makes biggest flour miller even bigger

WASHINGTON (Reuters) - ConAgra Foods Inc CAG.N, Cargill Inc CARG.UL and CHS Inc CHSCP.O won U.S. antitrust approval on Tuesday to merge their North American flour mill operations after agreeing to sell four mills to a Japanese company.

The companies had announced in March 2013 that ConAgra Foods Inc would join Horizon Milling, a joint venture of Cargill Inc. and CHS Inc that is the largest flour miller in America. CHS is owned by farmers and cooperatives. The combined company will be called Ardent Mills.

Horizon Milling is already the largest U.S. flour miller, Archer Daniels Midland is the second-largest and ConAgra is No. 3.

To secure Justice Department approval, the grain and food-handling companies agreed to sell four mills to Miller Milling Co, a U.S.-based unit of Tokyo-based Nisshin Flour Milling Inc, which is a subsidiary of Nisshin Seifun Group Inc 2002.T.

The mills to be sold are Horizon’s facility in Los Angeles and ConAgra’s facilities in Oakland, California; Saginaw, Texas; and New Prague, Minnesota.

“Without the Antitrust Division’s required divestitures, the creation of Ardent Mills would have resulted in less competition in the sale of wheat flour, resulting in customers, such as industrial bakers and food service companies, paying higher prices for wheat flour,” said Renata Hesse, a deputy assistant attorney general at the Antitrust Division.

The three companies are pleased with the approval, and the new entity will begin operations around the end of May, the companies said in a joint release. Under agreement with the Justice Department, this cannot be done until the four mills are sold.

“We strongly believe in the merits of this transaction and the benefits it will bring to customers, consumers, wheat suppliers, shareholders and employees,” said Paul Maass, president of Private Brands and Commercial Foods for ConAgra Foods.

Patrick Woodall of Food and Water Watch, which has asked for the deal to be blocked, said the required asset sale was inadequate since Ardent would have five of seven mills in the northeastern United States, between Boston and northern Pennsylvania.

And even with the divestiture of a Minnesota mill, Ardent will still have half of the flour mills in the St. Paul-Minneapolis area, he said.

Horizon, which is owned by Cargill and CHS, has 20 mills that can produce about 27 million pounds of flour a day while ConAgra’s 21 mills can produce 23 million pounds of flour, the Justice Department said in a court filing.

In afternoon U.S. trading, Conagra shares were down 0.4 percent and CHS shares were down 0.2 percent.

Editing by Ros Krasny, Doina Chiacu and Eric Walsh